The Bankwatch

Tracking the consumer evolution of financial services

Microformats as information brokers – the intelligent agents to support VRM

I have been thinking a lot about Vendor Relationship Management (VRM) over the holidays. Doc latched on the the concept as the the corollary to Customer Relationship Management (CRM). He spoke of VRM finally delivering the Cluetrain promise, and that got my attention. CRM places all the power in the hands of the vendor (Bank, telecom, retail store ) and that’s why you get annoying phone calls at dinner time, junk mail, or those annoying “can I put you on hold” comments while the poor call centre rep reads up on your history. CRM does nothing for you as a customer.

VRM is your software, you the customer. The concept (its just a concept right now) would allow you the customer to control your interactions, and effectively manage the vendors based on what you require. CRM allows vendors to manage you based on what they think you need, which is of course ludicrous.

However one of the constraints I see in the current thoughts on VRM is that it does not recognise how customers think. I would like to see this picture evolve to reflect the stages of customer purchasing. Consider your own behaviours. If you need a chocolate bar you go to the store with no thought and buy it. If you need a car, you go through stages in the purchasing process. So depending on what you need, and generally if you are buying it online, this will apply, its more than a chocolate bar purchase, and you want to control the entire process, not just the act of purchase.

Similarly for a new bank account, which is my focus here, but I hope this can be applied to VRM more generally. Brad and Cathy at Forrester have done much research on this topic, and come to realise that the web highlights the way that people think. In the old world it appears that customers walk into a Bank to buy a bank account. This doesn’t take into account the thought process and events that preceded, the discussion with family members, and friends, the picking up of brochures from several banks. In the new world, these events are exemplified on the web, including reading (brochures), discussion and email, (family and friends), web browsing (thinking).

Forrester concluded in the case of mortgage purchase there were several general steps:

We can abstract these steps into five general steps:

  1. research: sources, research product types
  2. education: the process and ways to get a loan
  3. quotes: obtain quotes, perform calculations based on the quotes. consider how it fits with customers expectations, decide what I will specifically apply for, how much, interest rate, terms required etc.
  4. apply: apply to one or more locations, and receive offers
  5. acceptance: accept one offer, and make final decision

Returning to the VRM information flow, the “request for proposal” is an amalgam of 3 & 4. In the consumers mind, these are two discreet steps. In some cases the decision will between 3 & 4 will be made almost instantaneously, but they are two separate processes. #3 is a ‘what if’ analysis, a simulation to consider life after the new service is in place (e.g., I have this great new car, but can I afford the payments, will it fit my garage, will my wife like it, etc). Whereas #4 is after the decision is made, and the consumer is ready to deal.

So thinking about how to manifest those steps online is what I have been thinking about. I recall back in the mid 90’s conjecturing during an IT strategy session, for the concept of intelligent agents, bots that would somehow (we had no idea how), scour the internet for the right service based on the customers preferences. I see VRM manifesting that concept.

Then I read some more on microformats today – (Hat tip to Read/Write, and Alex Faaborg of Mozilla) and this picture.

Link to informationBroker.jpg_large.jpg (JPEG Image, 1481×699 pixels)

The diagram is restricted to contacts, and calendar entries, but the part that caught my attention is the ‘information broker’ bit at the bottom. That information broker could represent the buying process I outlined above.

Consider the consumer who is at stage 1 of my buying process above, and he wants to buy a car. He has in mind a used model, something in the 2002 – 2004 range, and about $25,000, of which he estimates he will borrow $12,000. He instructs his financial services microformat with these facts, and as he browses, it gathers data based on his requirements. In fact, it could gather from sources without him actually visiting those sites, if he chose to instruct it accordingly.

Once he has enough information, the consumer can choose to instruct his microformat to move to stage 2, etc etc.

Part of stages 1 and 2, would include seeking advice and information from trusted social networks. Splogs need no apply, and would be blacklisted. In this view the notion of a splog black list service, similar to phishing black lists would be powerful. Trusted sources that eliminate spam/ splog information. Power would be truly transferred to the customers.

If I was a smart bank I would offer such a microformat for my customers, and it would pull in the best of breed, not necessarily my own products. Who has the nerve to try that? As a Bank I would be building trust with the consumer. If I do a good job there may be a business model there … a referral fee even?

Relevance to Bankwatch:

In this view the consumer is not restricted to Banks. Banks would have to re-architect their CRM systems to lookout for VRM requests, and recognise the stage the customer is at. But Prosper, Zopa and others will be doing the same thing, and can probably react faster than the Banks. Also, if the customer is researching (stage 1, do not press them to close the deal (stage5), or they risk losing the right to bid in future. This customer could blacklist them from their VRM tool.

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Written by Colin Henderson

January 2, 2007 at 11:20

10 Responses

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  1. Hey, Colin –

    Great to see more people thinking about VRM, and it’s really interesting for me to get perspectives from people in areas (banking) that I know relatively little about.

    If you haven’t already, take a look at a couple of pages on that I think address some of what you’re talking about here:
    The firefox plugin proposal works along the lines that you propose, with “agents” working on behalf of both seekers and vendors (I think/hope that the fulfillment scenarios section gives a reasonable picture of how it might work).

    That proposal doesn’t cover the (excellent, extremely important) reputation element that you bring up, but there are a couple of notes on that topic in the “technology -> identity” section of the wiki. I’m definitely with you on that one: VRM *can* work without reputation, but it’s much, much better with reputation tossed into the mix.

    Finally, the idea is roughly diagrammed out here:
    …though that diagram is of my own making and I haven’t yet updated it to reflect my own and others’ thoughts from the last couple of weeks.

    Again, excellent to see more thinking here!

    – Whit


    January 2, 2007 at 12:42

  2. Whit … Thanks for the comment. Now that I can see more clearly what I have been trying to define, I want to see how that fits in those diagrams. It may be the use of the word RFP. Perhaps it needs to be de-layered into the components along the lines mentioned in my post.
    Anyhow VRM is an exciting concept.


    January 2, 2007 at 13:35

  3. Hello Colin,

    Thanks for this very exciting post. Good way to understand kind of MicroFormat applications in the Bank 2.0 age.

    Will share your post with other BarCampBankers.




    January 3, 2007 at 14:18

  4. Colin (hello from a complete stranger),

    two years back a friend in the (UK) VC world tried to get me interested in “Intelligent Agents”. I didn’t understand what on earth he was talking about then (shame on me). But this stuff you are talking about kind of makes sense now. The idea of some smart agent (a VRM) acting on my behalf to get me the best loan deal or insurance choices starts to makes sense. Interesting – though still hard to get my limited brain to fully undestand the potential.

    Interesting way to look at things.


    January 4, 2007 at 20:44

  5. Alex .. thanks for the comment. You are right that its a new concept, because (I think) we as consumers are used to being force fed, and being under pressure from people selling things. This reverses that paradigm, but only to the extent that such tools/ bots/ agents/ microformats can properly represent our needs, and at the appropriate time.


    January 5, 2007 at 00:17

  6. I think the heart of the issue is in your sentence about “seeking advice and information from trusted social networks”. I wonder if the connection between CRM and VRM will be made not by individuals but by groups. Since each individual will belong to many such groups, they will fragment their VRM across them in some way I can’t quite put my finger on. In that kind of world, my bank needs to be part of one of my social networks, or at least interact with them.

    Dave Birch

    January 5, 2007 at 06:21

  7. Dave … that is interesting. I have been wrestling with how a ‘tool’ could act as an automatic intermediary between vendor and customer in an effective way.

    I don’t pretend to know yet the mechanics of the interaction, but groups or some social (word de jour) aspect could be the missing link that makes the tool work.


    January 5, 2007 at 23:20

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    January 24, 2007 at 01:25

  9. […] interested by VRM applied to banking, then you should definitely read Colin Henderson’s post on The Bankwatch. If you are more than interested by BankingVRM, you should then join BarCampBank’s workgroup […]

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